Aussies paying $31 billion in superannuation per year

Office workers and shoppers walk through Sydney's central business district in Australia, September 7, 2016. Reuters/Jason Reed

A new a report commissioned by Industry Super Australia has revealed that Aussies are paying $31 billion in superannuation fees every year. Half of the amount goes to funds that handle only 30 percent of all accounts.

Industry Super Australia chief executive David Whiteley said that banks are raking in at least $8.7 billion of those fees. He added that this strategy made "a honey pot for Australia's scandal-prone banks,” Sydney Morning Herald reports.

The Financial Services Council is yet to comment on the issue. It has previously argued in favour of better competition and flexibility so consumers would be allowed to pick their funds.

Meanwhile, the biggest pension fund in Australia has started voting against the re-election of directors at companies with no females on their boards. It is part of the A$2.2tn superannuation industry’s push to promote gender diversity.

AustralianSuper voted against chairman of Galaxy Resources’ Martin Rowley this month during its annual meeting. It handles $110 billion in assets and has 2.2 million members.

The fund also voted its shares against re-election of Marcelino Fernandez Verdes as chairman of Cimic Group, a $13 billion construction company, in April. In 2015, the Australian Institute of Company Directors (AICD) set a target of achieving 30 percent board representation for women by the end of 2018.

AustralianSuper wrote to 17 ASX-listed companies with all-male directors last year to warn them that they could be forced to deal with the same situation unless they appoint a woman to the board. Ian Silk, AustralianSuper chief executive said they believe diversity matters as a social end as well as in a value point of view.

The pension funds’ campaign has obtained the attention of company boards. Six of the 17 companies that AustralianSuper wrote to have recently elected women to their boards. These companies are Aveo, Galaxy Resources, Independence Group, Flexigroup Limited, Regis Resources and Western Areas.

Australia’s superannuation industry lists gender diversity as part of its wider focus on environmental, social and governance criteria. The sector, the world’s fourth-largest pool of retirement savings, is increasingly utilising its financial clout to persuade companies’ governance policies as it benefits from the obligatory contributions by employers.

“Diverse groups generally provide better outcomes than non diverse groups,” Silk told the Financial Times. He added they are seeking to optimise the value of companies in the interests of their members and clarified they aren’t seeking to cause problems for the sake of it.

Despite the protest vote by AustralianSuper, Rowley and Verdes were both re-elected to their posts. However, the fund pledged to never stop pushing for the change.

Louise Davidson, chief executive of AICD, said the body would be suggesting that all its members start to vote against senior directors in companies that have failed to meet the target in the annual meeting season starting in September. “We feel the progress on gender diversity has been too slow and companies are missing out on a superb talent pool,” she said, adding she thinks AICD’s campaign that covers a group of pension funds is a first in the world. For other news in Australia, watch the video below.

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